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In this article we will check out the progression of hedge fund sentiment towards United Therapeutics Corporation (NASDAQ:UTHR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is UTHR stock a buy? United Therapeutics Corporation (NASDAQ:UTHR) has seen an increase in enthusiasm from smart money recently. United Therapeutics Corporation (NASDAQ:UTHR) was in 36 hedge funds' portfolios at the end of December. The all time high for this statistic is 41. There were 31 hedge funds in our database with UTHR holdings at the end of September. Our calculations also showed that UTHR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
Robert Atchinson of Adage Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to take a glance at the new hedge fund action surrounding United Therapeutics Corporation (NASDAQ:UTHR).
Do Hedge Funds Think UTHR Is A Good Stock To Buy Now?
At the end of December, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UTHR over the last 22 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of United Therapeutics Corporation (NASDAQ:UTHR), with a stake worth $547.6 million reported as of the end of December. Trailing Renaissance Technologies was Avoro Capital Advisors (venBio Select Advisor), which amassed a stake valued at $432.6 million. Adage Capital Management, Palo Alto Investors, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Eversept Partners allocated the biggest weight to United Therapeutics Corporation (NASDAQ:UTHR), around 8.28% of its 13F portfolio. Consonance Capital Management is also relatively very bullish on the stock, dishing out 7.5 percent of its 13F equity portfolio to UTHR.
As one would reasonably expect, key hedge funds were leading the bulls' herd. Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, created the most outsized position in United Therapeutics Corporation (NASDAQ:UTHR). Avoro Capital Advisors (venBio Select Advisor) had $432.6 million invested in the company at the end of the quarter. Mitchell Blutt's Consonance Capital Management also initiated a $80.3 million position during the quarter. The other funds with brand new UTHR positions are Matt Sirovich and Jeremy Mindich's Scopia Capital, Dov Gertzulin's DG Capital Management, and Dmitry Balyasny's Balyasny Asset Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as United Therapeutics Corporation (NASDAQ:UTHR) but similarly valued. These stocks are Santander Consumer USA Holdings Inc (NYSE:SC), LHC Group, Inc. (NASDAQ:LHCG), TIM S.A. (NYSE:TIMB), Terminix Global Holdings, Inc. (NYSE:TMX), Axalta Coating Systems Ltd. (NYSE:AXTA), Planet Fitness Inc (NYSE:PLNT), and nCino, Inc. (NASDAQ:NCNO). All of these stocks' market caps resemble UTHR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SC,21,408605,1 LHCG,25,86356,8 TIMB,12,91184,12 TMX,30,623626,0 AXTA,46,1667144,1 PLNT,47,1704616,2 NCNO,28,177115,2 Average,29.9,679807,3.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $680 million. That figure was $1979 million in UTHR's case. Planet Fitness Inc (NYSE:PLNT) is the most popular stock in this table. On the other hand TIM S.A. (NYSE:TIMB) is the least popular one with only 12 bullish hedge fund positions. United Therapeutics Corporation (NASDAQ:UTHR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UTHR is 70.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on UTHR as the stock returned 26.7% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.